January 16, 2008

Unhealthy wealth binge tightens the poverty trap

Posted in International Economy · 23 comments ·

Have you noticed the Barnardos ad on bus shelters with a picture of a little boy staring out at you under the caption “It’s only poverty, he’ll grow out of it”?

It is one of those ads that make you stop and think. How will he grow out of it? Why do some children, who are born into poverty, escape it while others remain excluded from all the possibilities that a society has to offer? The ad suggests that your charity will help him; I’m not so sure charity alone will do the trick.

The problem of persistent poverty is a real one and an issue that has never been solved. If it had, it would have been eradicated years ago, not just for the good of the individuals afflicted by it, but also for the good of society.

Society is like an engine — if it is firing on all cylinders, it will operate smoothly, demand less attention. If one or two of the cylinders are broken, then the entire machine will suffer.

With that in mind, it is interesting to look at American studies of its underclass and the persistent poverty particularly amongst a large section of the black American population.

In recent years, a yawning gap has emerged between the black middle class and the black underclass, so much so that a recent survey concludes that close to 40pc of American blacks “can no longer be seen as a single race”. This — only 40 years after the unflinching race solidarity of Martin Luther King — is a phenomenal finding.

The easiest and possibly laziest explanation of black or any other group’s poverty is that it is all down to racism, discrimination or some other orchestrated societal bias. This may be a factor but it can’t explain the substantial black middle class.

Many other reasons have been proffered. Four decades ago, Daniel Patrick Moynihan — the Irish American politician who did so much behind the scenes coming up to the Good Friday Agreement — published a revolutionary paper. In it he ventured that the out-of-marriage birth rate and the percentage of black families headed up by single mothers — both at 24pc — might have something to do with poverty. He was dismissed as a bigot at the time.

Now many mainstream thinkers would say that he had a point about family structure as a possible contributory factor.

The New York Times recently carried an article about a study in Harvard by academic Henry Gates which is startling. Gates traces the family tree of 20 successful black Americans including Whoopie Goldberg and Oprah Winfrey. He discovered that 15 out of the 20 descend from freed slaves who had managed to obtain small plots of property by 1920. Back then only 25pc of black Americans owned property.

So if you are prepared to accept that there is a correlation between the success of middle class American blacks and their descending from black property owners, the question you must ask is, had all the freed slaves bought property, what impact would it have had on the fortune of their descendants?

Many have argued that property is wealth and wealth is the springboard for economic development. If you have wealth rather than income you can plan for the future, you can borrow against it and you can pass it on from one generation to the next. Property/wealth acts as a sort of pulley which allows right-minded people to borrow sensibly and thus, winch themselves upwards socially. In short, it accumulates. The idea of property rights and the centrality of property is the basis of Hernando de Soto’s groundbreaking work on persistent poverty in the Third World.

An extension of this idea might go some way to explaining how, after 15 years of a boom, Ireland still has persistent poverty. At the end of a binge, when the average income rose dramatically and the country went from being relatively poor to absolutely rich, how come we still have children below the breadline?

And now that consensus economic forecasts have suddenly admitted that the housing market has ground to a halt, what impact will the economic slowdown have on the prospects of those represented by the little boy staring out of the poster?

Despite all the allegations to the contrary, there has been a serious political effort to address income disparities in Ireland. In fact, in terms of the income gap between rich and poor, Ireland is right in the middle of the EU income league. The salaries of the top 20pc are over four times the average of the salaries of the bottom 20pc. This places Ireland above the UK, Spain, Italy and Greece but below Germany, France, Denmark and Belgium. However, the big problem in Ireland is not income — where all the Government’s efforts have been centered — but wealth. The gap between the wealth of the top 20pc in Ireland and the bottom 20pc is phenomenal. For example, the top 1pc of the country owns 24pc of the wealth and the top 5pc hold 40pc of the country’s wealth, according to Bank of Ireland figures. The poor cannot get their hands on wealth-generating assets.

As a result we have the typical Irish situation of no joined up thinking because one government policy negates the other. What is the point of throwing more and more cash at social welfare, if the core policy of inflating the housing bubble drives house prices out of the reach of the very recipients of social welfare who the Government purports to give a stake in society in the first place? The reason wealth is so important is that, unlike income, it can be used to borrow against, plan and dream of a better future. Borrowed credit allows people to live in the future and it is this ability to plan rather than just exist from day to day which distinguishes income from wealth. Income is spent today; wealth, in contrast, offers a platform for future progress.

This is why the property binge has been so damaging to the fabric of our society. It has put property, possibly the one true comprehensible wealth creating asset, out of the reach of thousands. So it doesn’t matter how much income you transfer in budgets and the like, because without wealth, income disappears like sand through your fingers.

More egregiously, by turning property into a speculative game of Paddy last, the poor Paddies who bought last will now experience the ludicrous situation where land, in one of Europe’s least populated countries, becomes an instrument of gradual indebtedness rather than wealth creation. In this situation, what chance has the little boy in the poster?

  1. big_fredi

    One of the problems I see with Ireland’s way of fighting poverty is that it mainly focuses on “giving money” instead of “making services unexpensive”.

    Lots of taxpayer money are given every year in child benefit instead of guarantee for example free health care for under 18′s. For those whose parents take care of, that child allowance will cover the medical expenses or even be saved for the future, but for those whose parents don’t worry about, they can be treated as livestock. Take the money and let them to be cared of by charity. With this system we will never get rid of poverty and all the money invested on that will left nothing but more poor children.

    About what’s the cause of it, I really think it’s more about education, either at home or at school, what shows you how to manage your resources and try to improve your situation or to continue the same way.

    Good topic.

  2. John Q. Public

    big_fredi I agree. Could you imagine how things would change in deprived areas if only we had sex education from primary school upwards like they do in the Netherlands. The results there are astounding, few single mothers pushing prams around caught in an unending cycle where the child in the pram ends up like it’s mother. In certain parts of the USA children are sent to ‘money camp’ during school holidays so they can learn to structure thier future.

    The standard of education in Ireland is high in terms of it being hard to get into college, get that A1 in Hons maths etc. but tends not to be all-encompassing for a developing mind. Students are not taught how to think, just what to learn off as David pointed out before.

    More often than not it’s a case of what one is ‘born into’ that determines one’s financial future whether it’s the little boy in the poster, middle-class Mary or a toff in Killiney!

    The education system here is in itself in many ways a hangover from a dysfunctional holy Catholic bygone era and needs to evolve and address the needs of our worst-off. Our schools need role models for the students to teach them self-respect and for others. We could learn from other countries in this area-social awareness, sex education, financial literacy, emotional development, psychological services.

    I don’t have all the answers but some of the above has to be worth a bash in an effort to break the cycle of poverty.

  3. Hiddink

    And we have had a govt that decided to tax wealth creation for the rich at 20% ( Capital Gains ) and Labour at very low levels at 40%…go figure!?….The thing that bugs me the most about the new landlord class in Ireland is that because the present govt are in hoc to property developers/landlords etc…they have refused to amend our tenancy laws to reflect the same type of security of tenure that is found in Germany/Italy etc……people there mostly rent…because they know that some “robopaddy” cannot chuck them out or raise their rent whenever they feel like it….I bought in Kildare last year…but would have happily continued to rent in Dublin there were better tenacy laws

  4. It would be interested to see how many of the 1% who own a quarter of the country’s wealth are in the Parliament.

    Or even more interesting what is the percentage of those in the Parliament who do not belong to the 1% class of ‘The Richest’.

    Or even more interesting with the time involved. What is the percentage of those who are not in the ‘Top 1% Richest Class’ when they are entering the Parliament, and what is the same percentage when they are leaving a Public Job. Since a Public Job that we elected them to do certainly should not be paid so that it pits them in the 1% Richest People in Ireland.


  5. defaoite

    Very true what you are saying. Sand through the fingers. I earn 43,000e yearly as a structural engineer but I have problems meeting all the bills. I know there are many worse than me and I am grateful but I feel sometimes that I am making little progress. Rent, fuel, food etc. for 2 child family. Borrowing then worsens the situation. If, however, I had been given property I would be wealthy and my kids would have been born into it.

    I dont mind though, I won’t buy a house anywhere unless it is reasonably priced. Renting means that I can think and am not under the pressures associated with mortages. I can progress at work and earn more. So I will make income work for me, hopefully. If in a few years I will be earning 100,000e, I will be able to pay for a property and not borrow.

    Good luck

  6. This piece does an excellent job explaining how inequalities in the distribution of wealth so distort economic opportunity. Earlier today, the Boston-based group, United for a Fair Economy, released a fascinating report of how these inequalities have played out in the ever-escalating subprime mortgage crisis. More at http://www.faireconomy.org/

  7. Conor

    I think that it is time that we changed our attitude and approach with regards to inequality. Inequality of incomes and living standards in later years is largely a result of inequality of opportunity in early life. Solving the problem is a different issue all-together.

    In the past, those on the right have either told those in poverty to ‘get on your bike’ or more productively used monetarist ‘trickle-down’ theories as a means of solving poverty. To an extent the approach is correct; in providing a stable and growing economic background, more employment, especially in the private sector is created. Thus in turn there are more opportunities out there for people to take advantage of, more people are paying taxes on income and consumption (albeit at a lower rate) and there should be more money available for public services.

    Nevertheless, a growing economy, growing employment levels and stable inflation do not alleviate the problem of a lack of opportuity in early life and therefore those who lack education, training etc. get left behind. This is where the left of the political spectrum steps in; to implement policy in order to solve this inequality.

    However, those on the left have in the past focused purely on gini coefficients and other useful but essentially limited measures of inequality. In effect, Keynesian policies have been implemented with increased levels of taxation and public-spending. Taxation has in many cases reduced the incentive for many to enter the labour market, while public spending has concentrated on cash-transfers, again reducing the incentive to enter the labour market while neglecting to negate the effects of a lack of opportunity in early life.

    Policy should be about giving people a hand-up, not a hand out. If we examine unemployment statistics, we find that those with a lack of education are the ones outside of employment. If we examine those in receipt of various different benefits, they began life in more deprived homes and largely will end life in a deprived home. I agree that many have managed to lift themselves out of poverty with a grit and determination only found in the most resilient of souls but life shouldn’t have to be that hard!

    Policy should be about taking practical steps, policy should be about giving people the tools to lift themselves out of poverty. We have free education, which many have benefited from but I would like to see more people benefit from education and training. For example, a single parent rather than spending life living off cash transfers which provide a mere existence at best should be given the opportunity to re-enter education and thus maximise their potential to earn income and thus accrue wealth. We could incentivise this return to education by making existing benefits conditional on return to education. Alternatively, existing benefits could be cut but were a single parent to re-enter education, their benefits would be increased, thus incentivising a return to education.

    I realise that the examole of a single parent does not apply to all cases of poverty and that education is not the only answer, but with a little bit of creative and joined-up thinking, I think that policy-makers could do a better job than they have done in the past. Those on the right have nothing to fear! Taxes will not need to be increased and spending will not have to be increased but re-adjusted and prioritised better. The environment will remain pro-business, perhaps it will become even-more pro-business and remember that there will be a larger talent-pool of skilled labour out there. Nor does the left have anything to feel compromised by. Forget about orthodox Marxism and crushing the capitalist class; leave ideology behind with your various drunken exploits that harken back to your student days. Did you not start out in the first place with the aim of bettering the lot of your fellow man?

  8. VincentH

    Overall I concur with most of the comment except one by conor. It is the work of the Right to make good and sure that the Left is peaceful, for if the left is not happy then the right does not exist. France and Imperial Russia, from one came the modern republic and the other …
    either way, the old right you might say, lost the run of them selves.

  9. Fergal Treanor

    David, please tell us more about “Joined Up Thinking”. What do you means by this? Please stop being all clever and writing catchy bestsellers; you have shown you can do that. Now start putting forward programmatic constructive proposals for what we can do to build for future generations.

    BTW do you REALLY think citizenship should be based on blood?

    All replies to this comment eagerly awaited!

  10. Fergal Treanor

    David, please tell us more about “Joined Up Thinking”. What do you mean by this? Please stop being all clever and writing catchy bestsellers; you have shown you can do that. Now start putting forward programmatic constructive proposals for what we can do to build for future generations.

    BTW do you REALLY think citizenship should be based on bloodlines?

    All replies to this comment eagerly awaited!

  11. John Q. Public

    Surely there are enough qualified people somewhere that can be used to analise different government policies to see where they contradict, overlap or where one policy defeats the purpose of the other.

    An intra-departmental examiner in the government or the like to help achieve targets and objectives. An overhall of the Dept. of Education would be no harn either.

    As for citizenship it seems crazy we are allowing so many to enter the country with no Irish connections at all, especially the illegals-Nigerians topping the list. Roughly 600,000 newcomers (including 200,000 illegal), what if things take a downturn here? will there be less to go around for our future generations?

    As a percentage of the population, America and Britain would have to allow in 45 million and 9 million people respectively to match our influx!

    Food for thought for the future I think.

  12. Philip

    Necessity is the mother of invention. We’ve had 10 years of no necessity. So we turned off the brain and binged or bought property. A little bit of hunger will start to get the brains fired up methinks – can’t wait for what the next 2-3 years will bring. Things will looking up as the waistlines will start shrinking. :)

  13. John

    There is more than a hint of outright snobbery in your last article. Would you prefer to see your stereotypes drinking all day rather than trying to make some money? There is a large part of middle class Ireland who are willing a recession so that the so-called robopaddies will be put back in their place and the old order will be restored.We can go back to the Doctor/Solicitor/BankManager on top and all the rest kow-towing. No thanks!

  14. Stephen Kenny


    You’re being a little disingenuous here. The economic problems that Ireland, US, UK, Spain,and Australia are starting to feel, have their most obvious face as property, but do not really relate specifically to property. The explosion of the financial services sector rests squarely on cheap credit. The fundamental problem could be desicribed as: People & businesses have been borrowing money at unsustanablely rates, and spending it on overheads – directly or indirectly. This has created a business sector (including property) that now relies on a level of expenditure that is completely unsustainable. If you read ‘Smartest guys in the room’ (the story of Enron) you’ll start to realise that what Enron did to the tune of about $25bn, the world economy has since been doing to the tune of, no one really knows what, but certainly measured in 10s of $trillions.
    The reason that a soft landing is impossible is simply that the rececnt 10 years (some would argue 25 years) of business growth has been funded, to a large extent, by debt, in one way or another. When the availablity of new debt finally falls, people and businesses will have less money to spend, which has a negative feedback effect across the entire global economy. What’s worse, we’ll still have the old debt, which someone will have to pay for, be it through repayments or write offs (either way, *someone* is paying). Also, we are increasingly competing with very low wage economies, which can only have the effect of driving down our wages, as well as driving up theirs – we’ll meet in the middle somewhere.
    The criticism of RoboPaddy is sinply that they’ve been living in a fool’s paradise. For people like David, it’s been 10 years of sitting in the dentist’s waiting room, knowing there’s pain ahead, and wishing they could just hurry up and get it over with. Knowing there’s pain ahead doesn’t necessarily mean that one likes pain (of course it might, but that’s for another kind of website).

  15. Ed


    Nobody wants a recession , but the property sector got out of control and threatened the rest of the economy. The “Galway Tent” brigade high jacked the government and together they were heading straight for a wall taking everybody else with them. David warned against this time and time again, but the powers that be castigated him at every opportunity as though he were a traitor. The latest excuse from the Government is that the present downturn is outside their control – they only take credit for upswings.

  16. AndrewGMooney

    I’m sick to death of the guilt trip mawkish ‘charidy’ adverts that infest my evening televisual viewing, and give me indigestion whilst eating late night chips, drunk at the bus-stop.

    It’s not that I don’t care, it’s just that it’s hard to see it as anything other than cynical focus-group marketing. “Who will cough up the cash and how do we make them empty their pockets?” The generic ‘kid in the advert’ in not a victim of economic poverty but of overt neglect and/or abuse.

    ‘Poverty’ cannot be solved. At least ‘Relative’ poverty versus ‘Absolute’. If you’ve got a dishwasher / washing machine / 40 inch plasma T.V / all you can eat pizza’n’porn buffet: You’re not ‘Poor’. Marginalized? Perhaps. But how much of that is Nature / Nurture / wilful indigent choice? The challenge of ‘the less fortunate’ who insist on repeatedly impregnating their complicit broodmares on the stairwells of Brum’n’Dubh housing estates. And then ignore/abuse/neglect the resultant kid till they’re feral Wayne/Waynetta.

    I’ll accept I’m ‘Poor’ when I have to walk five miles up to the springs on The Malvern Hills for clean water and beg for rehydration salts for my sick children. Otherwise: I’m not taken in by this bleating. Is it really an economic issue? Or a cultural / personal character issue? Or all three tangled up. Probably. IM-not-so-HO: It’s the breakdown of family life, ex-working class ‘pride’ in dysfunctional masculinity role models (rappers, footballers,etc), and the collapse of trans-generational social solidarity.

    What we have is the absolute collapse of individual character, ‘facilitated’ by Poverty-Pimp government bureaucrat do-gooders. The last thing they want/need is for the ‘poor’ to get their act together and stop being ‘clients’. Ah yes! Turning from the indigent to their ‘rescuers’: In raw, number crunching economic terms: How much is spent on ‘alleviating poverty’ in The UK? Eire? EU? USA? Huckabee’s onto something. Shame he’s such a die-hard Creationist. Or is he just Mr Machiavelli?

    What percentage of each pound/euro/dollar spent on alleviating distress goes in ‘administrative costs’ for the poverty enabling bureaucratic class who fear more than anything else the ‘liberation’ of their charges from systemic poverty? What would all the ‘helpers’ and ‘enablers’ and ‘facilitators’ do if the ‘working/indigent poor’ actually said: “Sod off with your schemes and pipedreams. Just give us the money and find something productive to do yourselves! Never mind lecturing us.”

    Discussing the collapse of the nuclear family without discussing the collapse of the one-income (traditionally male) breadwinner is pointless. In the 1950my Dad (R.I.P) moved from Laois to drive a bus for 60/70 hours a week in Birmingham, whilst my Mom (R.I.P) worked even longer to feed and clothe a brood of six. We were ‘poor’ materially, but we had a ‘rich‘, if troubled, family life. And we learnt the value of hard work and saving money. Well, some of the family did.

    I’m intrigued by the hypothesis concerning property ownership amongst black Americans, but I suspect a more forensic analysis would reveal a ‘cultural legacy’ as the true ‘wealth bequest’ for the nouveau-elite ‘persons of color’ in the U.S. A value-set that has ‘deferred gratification’ at the top of the list, religiously saving up to buy that 40 acres and a mule included.

    In London and other British cities there are considerable tensions emerging in supposedly ‘unified’ class groups such as ‘blacks’ and ‘immigrants’. Just research the words of Trevor Philips, the former head of the ‘Commission For Racial Equality‘ in the U.K.

    The idea that all ‘black’ people are a class is fatuous in the extreme. There is open antipathy between Jamaican and West African cultures in Britain, And, indeed, between Jamaicans and other Caribbean cultures, such as Barbadians. As for supposedly homogenous brown-skinned ‘Asians’: Well, Muslims are not Hindus, Hindus are not Sikhs, and largely: They don’t get on. And have radically different cultural approaches. But, hey honky! You’re not supposed to notice these uncomfortable facts.

    Whilst property ownership may well enable access to business start-up capital, it can just as easily enable The Mother Of All Credit Lines to ‘facilitate’ that designer-trash-sub-rap-underclass-MTV bling lifestyle.
    Equity Withdrawal? No problem sir! Here’s your Liar Loan and/or your deck of NINJA credit/store cards. And your arse/ass is ours if and when your housing ‘asset’ implodes, we’ll sell it at any price we can to clear your obligations to us. Then you can just fc-uk/feck off back to the queue for social housing with your Slum-Mum W.A.G’s and/or b*****s’n’h**z.

    Of course, there’s an argument which states that addiction to property ownership (UK/Eire/USA) rather than equity based investment in business and industry (Europe) ties up capital in speculative, non-productive housing asset-class gambling. Labour mobility is reduced due to ‘irrational’ ties to property and ‘community’ rather than a rental culture which allows rapid movement to buoyant labour markets. Just look at America where every loser in the sub-prime meltdown will just shape-shift to another state and ‘re-invent’ themselves in a farcical game of musical chairs. Until the next time.

    The working ‘poor’ in the U.K used to be anchored within a benevolent social contract which ameliorated the worst excesses of absolute/relative poverty with Credit Unions, Building Societies, Grammar Schools, Trade Union Benefits. Etc. A ladder up and out of the pit. All largely gone. Sacrificed on a bonfire of vanities by a generation so greedy and clueless not to realise they were eating their own offspring with their rapacious hubris.

    Many posters on this site correctly stress the absolute importance of teaching the yoof to think for themselves and to become financially literate. The only problem is the generation that, optimistically, aspires to impart those lessons they themselves haven‘t learnt! A generation that has binged itself to stupor on The Pleasures Of The Now, whilst squandering The Polis of The Past. As for The Future: Well, we won’t be here, but we may leave our offspring ‘money’ and ‘property’, having abandoned and absconded our responsibilities as parents, custodians and guardians of cultural and trans-generational solidarity. So much for being ‘British’, ‘Irish’ or any other irrelevant cultural or national appropriated, branded cipher identity in the C21st.

    Finally (!): I’m wondering what exactly Is the role of elected Governments in these scenarios. If they were the strategic guardians of national prosperity and long-term stability, they’d prioritise trans-generational equity not trans-generational wealth transfers from the Rich to their offspring. They would put the boot in. Draconian measures on lending criteria for property speculation. 6 x Income, my arse. That really facilitates family life and stops the attrition of birth-rates across the Western World. Time for massive increases on ‘Death Tax’ and ‘Property Portfolio Taxes’ to sober up Robopaddy, pissed at Newcastle Airport on his (delusional?) profits.

    What politician would have the bollix/bollocks to do this? And how long would he/she last before there was a coup by the dinner-party-cocaine-soiree-credit addict classes in D4, E1 and B17?

    Je suis l’agent provocateur

    Kind regards

    AndrewGMooney 11.09.1960. Birmingham. Eng-Eire-Land. Copyright: Exclusive to http://www.DavidMcWilliams.ie. All other rights reserved.

  17. Robert Mc Cluskey

    Andrew! You have thouroughly provoked me as I rarely ever post. What you have written is most definitely well thought out and in my opinion accurate. Well done! I always thought of economists as boring oul number crunchers but you have added so many other dimensions to the subject. Plitical thought, social studies, parenting, ethics and of course oratory and english. Maith an fear. keep on truckin

  18. AndrewGMooney

    Dear Robert!

    Cheers for that generous endorsement. I’m glad you enjoyed reading my response to David’s article as much as I enjoyed bashing it out!

    I used to think Economics was dry and for the nerdy boys at school, so went the literature / philosophy route. Then, one day, I read the following Nietzschean quote:

    “Economics are the method, but the object is to change the soul.” Margaret Thatcher.

    I realised there was ‘a serious gap in my education‘. I still think Art, Culture and Ethics define Economics, but I accept the ideas of Economists have an enormous impact on our lives. Hence, I try to keep in the loop. Knowledge + Info = Power, etc.

    David’s site demystifies a lot of dry theory, so it’s a useful place to exercise the brain without sinking in the quicksand of jargon. Mind you: Jargon can be a fun way to wind people up!

    Kind regards.

  19. kevin buckley

    In 1865 the freed slaves in Montgomery Alabama formed the First Baptist Church. A few years later the Second Baptist Church was formed by the ex house slaves who found the company of the freed field-hands unsavoury. Among them was Martin Luther King’s grandfather.The house slaves became the black middle class of today and the field hands became the black underclass. Culture is destiny. Think of the Irish maids of 19th century and their laboring husbands.

  20. Murchu

    Very good observation on wealth v income. I was a parenting a large family alone in the 1980′s when the government introduced an excellent scheme which allowed council tenants a grant of £5000 to surrender their council house. This enabled me to put a deposit on a house on an acre in my own neck of the woods down the country. I had to massage the truth a little, but managed to get a mortgage and I have never looked back. I really struggled in the first few years – I had absolutely NO money and we were very poor, but owning that house has enabled me to progress to the stage where I now have a very successful business, kids have grown up and done well etc.

    Poverty is a very complex issue and I will never forget the despair that I felt at times when I wondered how I would pay ESB bills, buy school uniforms etc. on a social welfare allowance. Many poor people just need a leg-up in the right way and they can haul themselves out of poverty. I’m sure you’ve all heard ‘give a man a fish and you feed him for a day, give him a boat and teach him how to fish and you feed him for life’.

  21. The damning statistic that the top 5% of the population own 40% of the countries wealth-and that this imbalance will worsen in the coming years puts Ireland in a kind of Argentina status where the wealth owning figures are pretty similiar. There a solid middle class were recently impoverished when fiscal juggling and devaluation wiped them out.
    The irish currency is happily protected from all this despite having the worst inflation record in the EEC.
    What happens when a huge imbalance in prices occurs within a common currency area.?
    Well, for a start, flight of capital.People from Italy and England, and Ireland snap up holiday homes in places like Austria,France & Spain ,where they cant believe they have bought a mansion on its own grounds for the price of a two bedroom apartment near their own capital city.
    When I left Ireland some years ago, I sold an old property close to Dublin central, near the peak of the madness, & I bought my new home here in Gran Canaria.
    It is (a lovely three bed house in a small development of 15 properties with private pool and overlooking the beach)
    I invested the surplus cash in a number of small lettable properties: my “Insurance bonds”,inflation proof; also easy to sell if necessary, and I retained a sufficient sum to live a very good life in the sun. Despite having no pension and none expected-except Mr Ahern´s generosity in the 66th year of my life which is still five years away and many do not live long enough to collect it..I find that my total asset value has grown effortlessly in recent years, despite taking a good living out of the very modest “wealth pie”.
    Something similiar has happened to the hugely wealthy buccanering property people attached to the main political parties, Fianna Fail & Fine Gael.
    For decades they have accrued extensive property portfolios. Many of them cooked the books,paid little or no taxes, and aided by a tax regime which allowed them to pay 20%capital gains taxes or reinvest their profits in high rise car parks etc. they prospered. They have vast cash reserves, and land banks which they will now happily leave undeveloped, and wait patiently for them to be rezoned in the fullness of time,by their dutiful colleagues in government at which time the profits of their investment will have multiplied a thousand fold.! Until the Irish property market again moves in their direction- they have set off to Britian, France, Poland , The Czech Republic like Viking marauders to plunder the European property market with the fortunes they have bled from the young irish mortgage holders; fortunes amassed under a benigh government which has overseen the reduction of infrastructure, and public services, to those of a third world country; and in parallel created perhaps the wealthiest coterie of landowners and developers on the european continent.
    As long as Bertie mantains our tax haven status for american companies, the country will continue to fill with immigrant workers.They will continue to accerbate the shortage of public services, health schools and so forth.
    Speculators will continue to get good rents because the present hiatus in the building industry is simply the result of prices reaching unaffordable levels.Remember, the 5% who own 40% of the wealth, own most of the development land.They can sit on it for 3 decades. They are not stuck for a bob.Dont expect the present downturn in the building industry to bring any solace for ordinary working people.If anything more grief.

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